Morgan Stanley and WestLB Lose Cases Because of E-Mail Evidence—or Lack Thereof

Brokerage firms involved in legal disputes are finding that they are being forced to hand over relevant electronic conversations that are resulting in large jury verdicts, regulatory fines, and the possibility that investors might re-open arbitration cases where e-mail conversations had been suppressed.

Here are a few cases where e-mail records played a key role that was generally not in the favor of the brokerage firm:

Morgan Stanley may have to pay several thousand investors anywhere from $3,000 to $20,000 after settling a case with FINRA, who says the brokerage firm did not in fact lose millions of e-mails because of the September 11 terrorist attacks. Investors had said these e-mails could have helped prove their arbitration cases against Morgan Stanley. FINRA says that millions of these e-mails had been restored to the firm’s system and Morgan Stanley tried to withhold this fact.

As part of its settlement with FINRA, Morgan Stanley paid a $3 million fine to the industry self-regulator and set up a $9.5 million fund from which it will pay investors that were affected by the omission.

Last month, a jury ordered WestLB AG to pay Claudia Quinby, a former sales employee, $2.54 million because it retaliated after she complained of sexual harassment. The e-mail records helped proved the case in Quinby’s favor.

Brokerage firms, like all businesses, are legally obligated to hang onto all evidence, including e-mails, when they are placed on notice that they are involved in a lawsuit. Federal securities laws mandate that securities firms have to keep records for a minimum of three years.

In 2005, a jury ordered UBS AG to pay $29.3 million in damages to Laura Zubulake. UBS threw away key e-mails that it should have kept after Zubulake filed a claim with the U.S. Equal Employment Opportunity Commission.

If you are an investor who has lost money because of the misconduct of a member of the securities industry , you have the right to get your investment back. Contact the law firm of Shepherd Smith and Edwards today and ask for your free consultation.

Related Web Resources:

Morgan Stanley, UBS No Longer Can Keep Secrets: Susan Antilla,, November 27
Morgan Stanley Must Pay Millions For Withholding E-Mails, Information Week, September 28, 2007
UBS Ordered to Pay $29 Million in Sex Bias Lawsuit, New York Times, April 27, 2005

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